DRAFTProposed Modifications to Existing Regulation

04/28/2015

Issue Paper 5: Application of Department of Defense Lump Sum Payments

for Public Service Loan Forgiveness

Session 3: April 28 – 30, 2015

Statutory cites:§455(m) of the Higher Education Act of 1965, as amended

Regulatory cites:§685.219

Summary of Change:This change would revise §685.219(c)(2) to apply lump sum payments made on a borrower’s behalf through the student loan repayment programs administered by the Department of Defense in the same manner as lump sum payments made by borrowers using Segal Education Awards after AmeriCorps service or Peace Corps transition payments after Peace Corps service.

Changes: See regulatory text below.

§685.219 Public Service Loan Forgiveness Program.

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(c) Borrower eligibility.(1)

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(iii)Makes 120 separate monthly payments after October 1, 2007, on eligible Direct Loans for which forgiveness is sought. Except as provided in paragraph (c)(2) of this section for a borrower who is in an AmeriCorps or Peace Corps position or who qualifies for partial repayment of his or her loans under the student loan repayment programs under 10 U.S.C. 2171, 2173, 2174, or any other student loan repayment programs administered by the Department of Defense, the borrower must make the monthly payments within 15 days of the scheduled due date for the full scheduled installment amount; and

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(2) If a borrower makes a lump sum payment on an eligible loan for which the borrower is seeking forgiveness by using all or part of aSegal Education Award received after a year of AmeriCorps service, or by using all or part of a Peace Corps transition payment if the lump sum payment is made no later than six months after leaving the Peace Corps, orif a lump sum payment is made on behalf of the borrower through the student loan repayment programs under 10 U.S.C. 2171, 2173, 2174, or any other student loan repayment programs administered by the Department of Defense), the Secretary will consider the borrower to have made qualifying payments equal to the lesser of—

(i) The number of payments resulting after dividing the amount of the lump sum payment by the monthly payment amount the borrower would have made under paragraph (c)(1)(iv) of this section; or

(ii) Twelve payments.

(3) The Secretary considers lump sum payments madeon behalf of the borrower through the student loan repayment programs under 10 U.S.C. 2171, 2173, 2174, or any other student loan repayment programs administered by the Department of Defense, to be qualifying payments in accordance with paragraph (c)(2) of this section for each year that a lump sum payment is made.

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